Success and frustration

Tuesday

Jul 11, 2017 at 12:01 AM

The 79th regular session of the Oregon Legislature finished its work Friday, having fulfilled its fundamental responsibility to pass a balanced budget. But the budget was balanced in a way that brings to mind economist Herbert Steinís Law: If something canít go on forever, it will stop. The structural problem in Oregonís public accounts can go on unaddressed in the two-year budget period that began July 1, but it canít go on forever, with double-digit spending increases every two years. The Legislature let slip an opportunity to stop the unsustainable trend on its own terms.

The opportunity presented itself in the form of a near-consensus among Republicans and Democrats, business and labor. All parties agreed in general terms on the idea that if the rate of increases in spending could be reduced, taxes could be raised to pay for improvements in public services, particularly education. But Republicans and business groups focused on cost controls, while Democrats and unions were interested in raising revenue. The Legislature adjourned without either side getting more than a small part of what it wanted.

The budget for public schools illustrates the problem. The Legislature approved $8.2 billion for kindergarten through 12th grade education, an 11 percent increase. Despite the record spending, some school districts still face the prospect of teacher layoffs and fewer instructional days ó the steadily mounting cost of public pensions and health care benefits will soak up most or all of the additional funds. The increase wonít provide enough money to fund a pair of voter-approved school-improvement initiatives, one that will expand career and technical education and the other to provide universal outdoor school.

Democrats sought to remedy deficient funding for education and other services by raising corporate taxes. It was a promising moment to advance such proposals ó business groups and some Republicans were willing to go along. But the Democratsí favored revenue-raising vehicles were versions of the gross receipts tax that voters rejected last year when they defeated Ballot Measure 97, and their would-be partners would not go down that road. The tax proposals were also unaccompanied by the robust spending controls that Republicans and business interests insisted were needed to ensure that new revenue would bring real public benefits rather than propping up the status quo.

The fact that a tax-and-spending deal was tantalizingly within reach is revealed by the Legislatureís successes in other important areas. Lawmakers passed a seven-year, $3.8 billion transportation plan that required difficult compromises, but all parts of the state will benefit. They approved a tax plan that will preserve the stateís expanded Medicaid program, largely at federal expense. Some Republican legislators promise to refer the Medicaid finance measure to the ballot, but the argument is over the details of the tax plan, not the desirability of continued coverage.

These are big successes ó and there were others, including an appropriation that will roll back tuition increases at the University of Oregon and on other campuses, and bonds to keep the Elliott State Forest in public ownership. The Democratic majority flexed its muscle on issues ranging from abortion funding to gun safety, but Republicans were far from powerless, blocking liberal priorities such as a carbon tax and a bill allowing local jurisdictions to impose rent controls. Partisanship is powerful in Salem, but few legislators are blinded by it.

That makes the missed opportunity for a tax-and-spending deal all the more regrettable. The 2017 Legislature convened under highly favorable political and economic circumstances; those circumstances can be expected to deteriorate. Labor-backed organizations are planning to bring corporate tax increase proposals to the ballot next year, risking a reprise of the bruising Measure 97 fight and reducing the prospect of a consensus on new revenues and cost controls. The Legislature was able to bridge a $1.6 billion shortfall in the current budget thanks in large part to an economy that is running in high gear; even a modest slowdown will make the all-but-inevitable shortfall in the next budget period more intractable.

The effects of Steinís Law have been delayed, but the law itself canít be repealed. Oregon canít afford double-digit increases in the cost of current programs forever, which means they will slow down or come to a stop. That can happen in a planned and balanced manner. Or it can happen in response to a political upheaval or an economic emergency. The Legislatureís failure to bring about the former increases the possibility of the latter.

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